Bullock Warns of Potential Rate Hikes Amid 15% Property Price Forecast

RBA Governor Michele Bullock has indicated that interest rates may still rise to combat inflation. Despite a potential 20% house price slump, she claims this would not spark a financial crisis. The RBA kept the official cash rate at 4.35%, as expected by markets, with a 50-50 chance of another rate hike before the end of the year.

The property market is predicted to fall by 15% over the next two years, according to ANZ economists, who point to interest rates and tax changes as major factors. Bullock emphasized that even if house prices drop by 20%, only around 5% of households would be in negative equity.

She also noted that financial institutions are well-capitalized and can absorb the potential losses. The RBA's decision to keep interest rates on hold was unanimous, with no discussion of a rate cut.